Prepared remarks
Good day, and thank you for standing by. Welcome to the Rhythm Pharmaceuticals Second Quarter 2026 Earnings Conference Call. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Dave Connolly, Investor Relations at Rhythm Pharmaceuticals. Please go ahead.
Thank you. I'm Dave Connolly here at Rhythm Pharmaceuticals. For those of you participating on the conference call, our slides can be accessed and controlled by going to the Investors section of our website, ir.rhythmtx.com. This morning, we issued our press release that provides our Q2 2026 financial results and a business update, and that press release is available on our website. We also released data for RM-718's Phase II trial in acquired hypothalamic obesity. Our agenda today is listed on Slide 2. On the call are David Meeker, our Chairman, Chief Executive Officer and President; Jennifer Chien, Executive Vice President, Head of North America; Hunter Smith, Chief Financial Officer; and Yann Mazabraud, Executive Vice President, Head of International is on the line joining us from Europe. On Slide 3, I'll remind you this call contains remarks concerning future expectations, plans and prospects, which constitute forward-looking statements. Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors, including those discussed in our most recent annual or quarterly reports on file with the SEC. In addition, any forward-looking statements represent our views as of today and should not be relied upon as representing our views as of any subsequent dates. We specifically disclaim any obligation to update such statements. With that, I'll turn the call over to David Meeker, who will begin on Slide 5.
Good morning, and thank you for joining us. We have a lot to share today, headlined by a strong start to the U.S. launch of IMCIVREE for acquired hypothalamic obesity, reinforcing our conviction that HO represents a meaningful long-term opportunity for Rhythm. Progress during the quarter wasn't limited to our commercial business. In June, we presented positive 6-month data in Prader-Willi at ENDO showing setmelanotide achieved clinically meaningful BMI and BMI-Z score reductions, reductions in fat mass and preservation of lean mass and improvements in hyperphagia and anxiety measures. These data confirm the mechanistic rationale that MC4R agonism plays a key role in the pathology of PWS and demonstrated the positive impact IMCIVREE can have in this difficult-to-treat patient population. We look forward to updating you on the path forward for PWS in the next few months. Which brings us to our pipeline. We believe our next-generation MC4R agonists have the potential to bring meaningful new treatment options to patients living with rare neuroendocrine diseases. And today, we announced encouraging results to demonstrate RM-718, our weekly MC4R agonist has the potential to deliver clinically meaningful BMI reductions in patients with acquired hypothalamic obesity with efficacy comparable to what we've demonstrated with setmelanotide and bivamelagon and importantly, a favorable tolerability profile with no reports of generalized hyperpigmentation. But first, let me comment on the IMCIVREE launch in HO. This is a unique severe rare disease marked by accelerated and sustained weight gain caused by a brain tumor and/or its treatment or other brain injury to the hypothalamus that impairs the MC4R pathway. Acquired HO is clearly distinct from general obesity and remains underdiagnosed and underrecognized. With an estimated 10,000 patients in the U.S., a similar number in Europe and between 5,000 and 8,000 patients in Japan, this represents a significant global opportunity. In July, results from the Phase III HO TRANSCEND trial were published in the New England Journal of Medicine by lead author, Dr. Jennifer Miller; and senior author, Dr. Christian Roth, two of the world's leading experts in HO. In addition, as shown on Slide 6, the New England Journal of Medicine published an accompanying editorial with its science behind the study feature authored by Professor Sadaf Farooqi, one of the world's leading experts in the MC4R pathway diseases. Articles like this in the New England Journal of Medicine ten years after the POMC deficiency New England Journal of Medicine article that put Rhythm on the map, raised visibility of a historically underrecognized disease among clinicians, researchers and payers and further establishes setmelanotide as a clinically meaningful advancement for patients. The awareness that there is an effective therapy for a rare disease increases the urgency on all parts of the health care system. Getting to a diagnosis matters when there's a precision medicine available. The New England Journal of Medicine article follows on the heels of the FDA approval on March 19 of this year. Throughout 2025 and 2026, our teams have been in the field focused on disease awareness and patient identification, engaging endocrinologists to deepen understanding of acquired HO and the connection between hypothalamic injury and the disruption of the MC4R pathway. Our HO launch builds on this engagement and a successful commercial effort in BBS, an opportunity that continues to grow. Rhythm now has a mature rare disease commercial platform built on four years of commercial success and established relationships across physicians, payers and patient communities. We're off to a promising start with this next phase of growth with strong demand from patients and families, a broad and growing prescriber base and a positive reception from payers; we are encouraged with the first 14 weeks of the U.S. launch. Since approval on March 19, we have received more than 400 start forms from approximately 300 prescribers. Jennifer will provide additional color on the U.S. launch. Yann will detail the next steps toward an anticipated approval and launch in Japan this year and country-level launches in Europe next year. We are mindful that it is early days. However, the first launch quarter performance reinforces our conviction that HO represents a long-term durable and sustainable opportunity for Rhythm. Now I want to briefly review preliminary data from the open-label Phase II Part C trial of RM-718, our weekly MC4R agonist in acquired HO. RM-718 is one of the two next-generation MC4R agonists that have the potential to improve on the hyperpigmentation and convenience of setmelanotide. The weight loss efficacy for each of these three assets has been remarkably consistent. We believe these preliminary results are encouraging and meaningfully derisk 718 as a development candidate going forward. Beginning on Slide 8, we show the patient disposition and patient demographics. Eleven patients were enrolled and eight patients remain on active therapy. Seven patients have reached 16 weeks, and that is the data we are sharing here. Two patients discontinued because of adverse events during the first four weeks of treatment. One patient stopped because of injection site reactions and a second patient discontinued secondary to ongoing nausea, which could not be controlled even with dose reductions. A third patient completed the 16-week trial period and later withdrew from long-term extension for personal reasons. Two additional patients have yet to reach the 16-week time point. Patients in the trial were 12 years of age or older with a mean BMI of 40.1. Per protocol, doses were escalated to 40 milligrams as tolerated. The mean BMI change of 11.6% for the seven patients who have reached week 16 is shown on Slide 9. As you can see on Slide 10, these results compare favorably with setmelanotide and bivamelagon results at a similar time point in patients with acquired HO. In a pooled analysis of patients with HO in the Phase II and Phase III setmelanotide trials, the week 16 BMI reduction was 10.1%. For bivamelagon at the 600-milligram dose, mean BMI reduction for seven patients at week 14 was 10.1%. Slide 11 shows a continued deepening of the effect in four patients with 28 weeks or more of treatment. As shown on Slide 12, RM-718 was generally well tolerated with the most common adverse events being injection site reactions and nausea. Importantly, we have observed no generalized hyperpigmentation with either bivamelagon or 718, which you would expect to see with MC1R agonism. Overall, these results validate our conviction that 718 has the potential to be a viable treatment option for rare MC4R pathway diseases. Both 718 and bivamelagon have been shown to affect BMI reductions comparable to setmelanotide in patients with acquired HO and both have greater specificity for the MC4 receptor without generalized hyperpigmentation. Importantly, the patent protection for both 718 and bivamelagon extends past 2040. We believe today's data further derisks our ability to build a durable franchise of MC4R agonists. Enrollment of Prader-Willi patients in Part D of this open-label trial will complete by the end of the year with a goal of enrolling 10 to 15 patients. As I mentioned, we are moving closer to a decision on a potential path forward for PWS with setmelanotide, bivamelagon or 718, all viable options. As a reminder, we are aiming to initiate the Phase III trial of bivamelagon in RH over the end of this year, which is listed among the upcoming milestones on Slide 13. The first patients enrolled will be patients 12 and older as we finalize CMC work for the oral dissolvable tablets in the first quarter of next year. With that, I'll turn the call over to Jennifer and then Yann to provide more color on our strong commercial progress during the quarter.
Thank you, David. I'll begin on Slide 15. I'm pleased to provide an update on the U.S. launch of IMCIVREE for acquired hypothalamic obesity. This was the first full quarter of launch plus one additional week following FDA approval on March 19. While we remain very early in the launch, we have seen strong demand, broad and expanding prescriber engagement and activation and positive early payer experience supporting access. Overall, the early indicators are encouraging and reinforce our conviction in the long-term opportunity for acquired hypothalamic obesity. On Slide 16, I'll start with the patient level metrics. In the 14 weeks between FDA approval on March 19 and June 30, we received more than 400 start forms for acquired hypothalamic obesity. This includes 66 start forms for converted trial patients accounting for almost all the U.S. trial patients. The age distribution for these patients is evenly split between patients 21 and younger and those 22 and older with 21% of prescriptions for patients ages 4 to 11, 18% for patients 12 to 17 and 12% for patients 18 to 21. Care for acquired HO patients tends to be more coordinated in the pediatric setting, and this contributes towards higher rates of recognition and diagnosis. As a result, pediatric patients make up a larger share of our early IMCIVREE patients. We expect this to evolve over time and to have a higher contribution for adults in the future. Among these early prescriptions, we see a broad mix of both incident and prevalent patients. Based off an internal analysis of a portion of prescriptions received, approximately 15% of patients suffered the injury resulting in their acquired HO within the last two years. The majority of start forms are from prevalent patients living with HO for more than two years, with approximately 50% of patients having their injury occur more than 10 years ago. These early dynamics are encouraging and demonstrate meaningful demand across a broad range of patients. On Slide 17, our provider level metrics for the acquired HO launch. We are seeing broad activation and engagement of health care providers. Between approval and the end of the second quarter, we have approximately 300 unique prescribers for acquired HO. Approximately 20% of these physicians have prescribed IMCIVREE for more than one patient with acquired HO. In line with our view that this is primarily a specialty opportunity, the majority of prescribers are endocrinologists with adult and pediatric endocrinologists accounting for 43% and 37% of prescribers, respectively. We are encouraged by the early activation levels of our priority accounts and top prescriber targets. We've made solid progress in penetrating our priority accounts with 65% activated by the end of June and almost 25% of prescriptions coming from these accounts. On to Slide 18 and our progress with payers. The early payer experience has been positive and supportive of access, a reflection that payers recognize the severity of acquired HO and similar to BBS, understand the distinction from general obesity and the benefit of IMCIVREE. While we still work to gain access for prescriptions received since approval, we are encouraged by the number of initial approvals that came in at the prior authorization stage during this first quarter of launch, many through payers without a specific acquired HO policy for IMCIVREE yet in place. By the end of Q2, we secured positive policies for HO covering approximately 25% of Medicaid covered lives and 35% of commercial covered lives. In line with our expectations, we expect additional policies to become established within the three to nine months post approval or by the end of this year. The strength and consistency across these early launch metrics give us confidence this opportunity will continue to build over time, reinforcing our long-term conviction in the acquired HO opportunity and our belief that IMCIVREE can become the standard of care for these patients. Moving to Slide 19. While we are encouraged by our progress in the HO launch, we also feel there remains opportunity for growth in BBS. We recently supported the publication of a new evidence-based consensus-driven diagnostic algorithm designed to help physicians identify and diagnose patients with BBS earlier in their disease journey. In a population that has historically been very difficult to diagnose, we believe this is an important step towards enabling more BBS patients to get to a timely diagnosis and appropriate care. Lastly, on Slide 20, we are also evolving our North America commercial organization to ensure acquired HO and BBS each receive dedicated focus to maximize our ability to help patients. With the acquired HO launch now underway, we have made a transition to focus our 42 territory managers exclusively on HO. We modified our field team structure, so we now have a new territory manager group dedicated to BBS with plans to grow this to ten territory managers. This reflects our long-term commitment to patients living with BBS. These changes allow us to pursue both opportunities with dedicated teams, ensuring focused execution in acquired HO while continuing to build upon the strong foundation we have established in BBS. Now let me hand it over to Yann.
Thank you, Jennifer. Our strong international commercial performance continued during the second quarter as the number of patients on IMCIVREE continues to grow, either through national reimbursements or named patient sales. And we have also made significant progress in Europe and Japan towards our goal of bringing IMCIVREE to patients with acquired hypothalamic obesity. Slide 22. We are entering the final stages in the regulatory process towards approval and launch in Japan. We anticipate IMCIVREE approval for acquired HO and launch in Japan by year-end 2026. Following the PMDA review, we anticipate marketing authorization from the Japan Ministry of Health, Labor and Welfare, or MHLW. Once we receive marketing authorization, we would begin pricing discussion with Japan National Health Insurance Authority, and this process can take two to three months. With this timeline, we would anticipate commercial launch in Japan in the fourth quarter. With approximately 5,000 to 8,000 patients living with acquired hypothalamic obesity in Japan, which is a higher per capita prevalence than the United States or Europe, Japan represents a meaningful opportunity. Our team in Japan is in place, actively engaging with the community of experts, patients and caregivers. Similar to the approach Jennifer's team took in the U.S., we are engaging with the treatment community to identify potential patients ahead of launch. We will share more details about Japan on our next quarterly conference call. Next slide, turning to commercialization of IMCIVREE for acquired HO in Europe. In May, the European Commission granted marketing authorization for IMCIVREE for the treatment of obesity and control of hunger in patients 4 years of age and older with acquired hypothalamic obesity due to hypothalamic injury or impairment. We have a very experienced team in place working through country-level processes to secure market access and reimbursement, which we have successfully done in the past years for previous indications, BBS and the pediatric label expansion. In Germany, we anticipate launching in the first half of 2027. We are encouraged by the initial engagement in the process to secure an exemption from the German Federal Committee or G-BA Annex II exclusion list. The G-BA Annex II exclusion list prohibits reimbursement for lifestyle drugs such as drugs indicated for smoking cessation and general obesity. We are confident in our ability to secure an exemption, enabling a reimbursement for acquired HO as we have done it before for all our previous indications. We are making progress towards market access elsewhere in Europe. We have submitted the dossiers to begin pricing discussions in France, in the U.K., in Italy, in Spain and in the Netherlands with launches in each country anticipated in 2027 following Germany. With an estimated prevalence of approximately 10,000 patients in Europe, it is a meaningful opportunity. And our early access programs in France and in Italy have enabled many of the leading physicians to gain experience with setmelanotide and see the benefit in patients living with HO. In May, we presented approximately a dozen posters at the European Congress of Endocrinology and at the European Congress on Obesity. Next month, at the 2026 European Society for Pediatric Endocrinology Meeting, we have had three abstracts accepted for oral presentations and three accepted for poster presentations. And there are two additional non-Rhythm-sponsored presentations that will highlight findings in patients living with BBS from Germany and the U.K. We have approximately 75 abstracts, both originals and encores submitted and presented and are slated for presentation this year in European and Japanese medical congresses, giving us an unparalleled level of engagement with the international experts and health care providers. With that, I will turn it over to Hunter.
Thank you, Yann. I will begin on Slide 25. We exited the second quarter in a solid financial position and are encouraged by our strong initial launch execution in acquired HO in the U.S. At the same time, we continue to make meaningful progress with BBS in the U.S. and internationally, underscoring the strength of our business and the opportunity we see for continued growth. We had a strong second quarter of 2026. Global net product sales of IMCIVREE totaled $71.3 million, which represents 19% sequential growth over Q1. During the second quarter, $51 million or 72% of product revenue was generated in the United States. Globally, we saw continued growth in patients on reimbursed therapy with an increase of greater than 20% over the prior quarter, primarily driven by the acquired HO launch and continued growth in BBS in the U.S. as well as ex-U.S. growth in BBS and our HO early access programs. On Slide 26, I'll walk you through the quarter-over-quarter revenue change with revenue increasing from $60.1 million in Q1 '26 to $71.3 million in Q2. We saw an $11.3 million increase in revenue attributable to increased product demand in the U.S. A bit more than half of this increase came from the strong start in the U.S. launch for acquired HO, where a percentage of our early scripts converted to starts at the prior authorization stage, as Jennifer had mentioned previously. BBS had a strong quarter as well with higher demand growth and strong compliance compared to what we have experienced in other recent quarters. GTN improved somewhat in the quarter to 86%, providing additional support to Q2 revenue. With the anticipated increase in demand for IMCIVREE following FDA approval for acquired HO, product shipments to Rhythm Specialty Pharmacy exceeded patient dispenses by approximately $2.9 million, providing a modest benefit to revenue in the quarter. Inventory at Hampton Specialty Pharmacy increased slightly to 20 days as of June 30. International revenue decreased from $23.2 million to $20.3 million in Q2. Even though we saw a steady increase in the number of patients on reimbursed therapy, the decrease in revenue was mainly attributable to a $3.8 million retrospective charge associated with the French contribution mechanism, which levies a charge on pharmaceutical companies when reimbursed drug sales industry-wide exceeds specified statutory thresholds. $2.3 million of this $3.8 million charge was related to 2025 revenue. Excluding this impact, our international business remains strong as evidenced by the continued growth in patients on therapy during the quarter. On Slide 27 is a financial snapshot of the second quarter of '26 results compared to the second quarter of 2025. Cost of goods sold this quarter was 12.5% of product revenue, within our normal range, and primarily driven by cost of materials and royalty payments on setmelanotide in connection with higher net product revenue during the quarter. As a percentage of product revenue, COGS varies quarter-to-quarter based on changes in inventory balances and manufacturing activity, and this quarter increased slightly because of that. R&D expenses were $43.4 million for the second quarter of 2026 compared to $42.3 million in the same period last year. Sequentially, R&D expenses increased $1.7 million compared to the first quarter of 2026. This sequential quarter-over-quarter increase was due to increased spending on bivamelagon clinical trials and preclinical work associated with our congenital hyperinsulinism program. These were partially offset by lower headcount-related costs. The year-over-year increase is primarily attributable to an increase in headcount-related costs, increased costs related to genetic testing and preclinical work and the increase partially offset by reduced costs associated with RM-718 development and clinical supply. SG&A expenses were $67.4 million for the second quarter of 2026 compared to $45.9 million in the prior period. Sequentially, SG&A expenses increased by $3.8 million or approximately 6% compared to the first quarter of 2026. The increase was primarily driven by higher personnel-related costs to support our expanding commercial operations. Weighted average common shares outstanding were 68.6 million for Q2 2026. GAAP EPS for the second quarter of 2026 was a net loss per basic and diluted share of $0.73, including $0.02 per share from accrued dividends on convertible preferred stock of $1.1 million. Cash used in operations was approximately $9 million during the quarter. We ended the second quarter with approximately $331 million in cash, cash equivalents and short-term investments, which we continue to expect will be sufficient to fund planned operations for at least 24 months. Lastly for me, on Slide 28, there is further detail on our operating expenses for the second quarter and our full year operating expense guidance. For the second quarter, operating expenses of approximately $110.9 million included $26.1 million of stock-based compensation. Looking ahead to the second half of this year, we are updating our annual OpEx guidance. We now anticipate approximately $363 million to $397 million in non-GAAP operating expenses for 2026 comprised of non-GAAP R&D expenses of $175 million to $195 million and non-GAAP SG&A expenses of $188 million to $202 million. SG&A guidance remains unchanged, while the midpoint of our R&D expense guidance has been reduced by $20 million as the timing of certain CMC activities related to RM-718 and bivamelagon has shifted from late 2026 to early 2027. We do not expect these changes to affect overall timelines for ongoing or planned clinical development work with either asset. And with that, I'll turn the call back over to David.
Thank you, Hunter, and we'll open it up now for Q&A.
Questions and answers
And our first question comes from Tazeen Ahmad of Bank of America.
Congrats on a good quarter. It's early, but can I ask what type of expectations you have around discontinuation rates? Presumably, you're not seeing any, but if you are, can you just give us any color on why those might be happening on a go-forward basis? What do you think over time, discontinuation rate from setmelanotide could be for the HO indication?
Thanks, Tazeen. So it is really early in the launch to articulate color in terms of the discontinuation rate expected. I would say one thing, though, in the past, we have outlined that the global discontinuation rate for the BBS patients was around 30%. Holistically, there are differences just in terms of what our data has shown in the BBS patient population versus the HO population in terms of the strength of efficacy that may make that discontinuation rate lower in this particular population. There are also different factors in the HO population that we're experiencing in terms of the ease of injections and such that may also overall make the ongoing discontinuation rate for this patient population a bit less than the BBS patient population. And that was also seen in the clinical studies, like when you compare the BBS clinical studies versus the HO clinical study and compare the discontinuation rates there. So it's one thing that we're definitely going to be monitoring. There's a huge focus on that as an internal organization, and we'll continue to monitor that moving forward.
And our next question comes from Phil Nadeau of TD Cowen.
Congratulations on the strong progress. A question on the HO launch. It seems to be going really well. Based on our math, if you back out the clinical trial patients, you're doing about 110 patient start forms per month. We're curious to get your thoughts on whether you think that's sustainable for the next couple of quarters. Is there any sign of an early launch bolus? Or do you expect a more even trajectory to patient starts?
So overall, in terms of the start forms experienced in the first quarter plus the one week since approval, we're really happy with what we're seeing with the prescriptions coming in. As you mentioned, there's a one-time event in terms of the clinical trial patients. If you take that out, I would say that in any launch, there may be some patients who were anxiously waiting to get on therapy upon approval. With that said, I think all of the launch metrics that we have been monitoring strengthen our belief holistically in terms of this long-term opportunity for sustained ongoing growth in the HO opportunity. As I outlined, the prescriptions are really coming from a good breadth of prescribers versus being localized to just a few writing the vast majority of these prescriptions. We're also seeing a lot of different things around the patients and the background from an age perspective, disease severity, incident versus prevalent patients, which really point to the breadth in terms of patients within the HO indication that are interested in getting on to this therapy. And even with the prescriptions that we have received, there are still physicians who have additional patients under their care that they have not yet prescribed for. So overall, a lot of opportunity still remains. I would say that with that said, there are some considerations in terms of the speed of the uptake. These are very, very busy endocrinology offices. They have long wait times for their patients. That can impact our ability to get in, in terms of having the ongoing discussion. But our teams are persistent, and that can take some time to continue the dialogue with these health care providers. Another piece is that many of these patients are not yet diagnosed. It takes some time after we're in there to educate the physician for that patient to come in and be evaluated by the HCP before they can have that IMCIVREE discussion. It's a new drug on the market, so some physicians, even with more than one patient, want to experience IMCIVREE before prescribing to all of their patients at once. So once again, there's so much opportunity that remains. We feel confident in terms of the ongoing trajectory, but there are some considerations as well.
And Phil, as you know, we don't provide forward guidance on patient counts, but everything that Jennifer just outlined speaks strongly to the fact that although there may have been a bit of pent-up urgency, there was no single bolus in this launch. We feel really good about all these metrics and how they speak to the future.
And our next question comes from Derek Archila of Wells Fargo.
Congrats on the updates and the progress here. I know you highlighted greater than 400 start forms against, I think, a 2,000 number for identified HO patients, implying about 20% penetration into that pool in 14 weeks. So I guess, should we be thinking that number of identified patients is materially larger now?
Yes. We provided that number back in September, and we have not updated that number. We have been ongoing since that time educating additional physicians within our target list, and we still have a ways to go in terms of penetrating the full list. So that number for both the suspected or diagnosed acquired HO patient population is continuing to grow.
And our next question comes from Paul Matteis of Stifel.
Congrats on the quarter. I was wondering if you could comment on what you're seeing as it relates to either concomitant use with GLP-1s or whether many physicians are looking to try a GLP-1 before IMCIVREE. And then I know it's early on the payer side, but are you seeing any payers put in a GLP-1 step edit for accessing HO?
Sure. I'll start with the payer question. We are pleased with the progress being made around HO-specific policies. Of the ones that we have in place, there is no step edit requirement needing to try a GLP-1 prior to IMCIVREE, which is aligned with our label. Relating to GLP-1 use in the acquired HO patients, of the ones that have been prescribed IMCIVREE, about 50% had prior or current experience on a GLP-1. Currently, about 25% of the patients are still on a GLP-1. When I mentioned that, it's not always known whether it's for diabetes versus for the obesity indication. But about 25% of the patient population is on a GLP-1. That was during a time when IMCIVREE wasn't available. There wasn't a specific treatment to treat their underlying condition. As we move forward and IMCIVREE becomes available, we expect some of those dynamics to change. Importantly, through the metrics I outlined, 50% of these patients were never on a GLP-1 but were still interested in IMCIVREE after understanding there was a treatment available for their specific condition.
And Paul, just to add a little context: in the clinical trial, we had approximately 25% of the patients either with prior experience or actively on GLP-1s, and they met criteria for entry and had a virtually identical response to IMCIVREE as the others. That experience reinforces that a precision medicine for this population is the right approach.
And our next question comes from Dennis Ding of Jefferies.
I have a broader question for David. There have been investor questions around biotech M&A following speculation around other deals. I'm curious, given Rhythm is a leader in the rare disease space and David, you serve on several biotech boards, how would you characterize pharma M&A appetite recently? Without going into specific discussions, do you have any general comments on what pharma is excited about, and whether they think premiums may be getting harder to justify? And as a quick follow-up, the territory manager split, 42 for HO and 10 for BBS, did that get implemented already? When will that happen? And do you expect an acceleration in HO adds in the second half?
Thanks. On biotech M&A, separate from Rhythm, I think the landscape remains active. Pharma has been acquiring assets to expand pipelines, and I expect that to continue. It's a robust ecosystem with a strong early biotech community creating value and pharma looking broadly. We will watch how events unfold, but I don't see it as a dampening factor to the broader acquisition environment. With that, I'll turn it over to Jennifer.
Relating to the territory manager split, this was already implemented. We have split the teams into two. One guiding factor was that there is opportunity in both BBS and HO. Historically, the majority of time spent by the 42 territory managers when combined was already focused on HO. We wanted to ensure we had sufficient focus to unlock the BBS opportunity and get those patients to diagnosis and treatment as well.
And our next question comes from Mike Ulz of Morgan Stanley.
Congratulations on the strong quarter and the 718 data. Maybe a question on 718: now that you have early HO data and it seems to be trending in line with your other assets, can you talk about early thoughts on read-through to the PWS data and remind us when that data is coming?
Thanks, Mike. We're pleased with the 718 data. To remind everyone, 718 was built with similarities to setmelanotide and with greater specificity for MC4R, which is reflected in the tolerability profile and absence of generalized hyperpigmentation. This data validates the original hypothesis and supports the potential of 718. Read-through to Prader-Willi is early; enrollment in Part D will complete by the end of the year and we'll update when appropriate. Our decision on which asset to advance in PWS will be driven more by CMC and timing of supply rather than waiting for additional efficacy data alone. Protocols and planning are underway so we'll be ready to move when we make that choice.
And our next question comes from Seamus Fernandez of Guggenheim Securities.
Two questions. Could you provide more color on developments in Japan and how you expect the HO rollout to emerge there and the pace at which it could play through? Also, there's still some discussion around daily versus weekly formulations in PWS. Can you provide a better understanding of where you're likely to come out on that? Are there critical decisions to be made, or could you advance both bivamelagon and 718 to offer choice to the PWS population?
On Japan, Yann will provide more detail, but our expectation remains to launch by year-end 2026 pending PMDA and MHLW steps and subsequent pricing discussions. On the daily versus weekly question for PWS, Dr. Miller had commented on preference for daily dosing due to routine, and we will take expert opinion into account. That preference is one factor among many; it is not the sole deciding factor in asset selection. We could envision developing both molecules for larger opportunities like HO and PWS to offer choice, though it might not be in full parallel for every indication.
Thank you for the question. A few points on Japan: we plan to launch before the end of the year. Prevalence is meaningful. We can leverage claims and hospital data like in the U.S. We have had a strong team in place for many months and field medical affairs teams deployed for about six months. We also have the support of the scientific committee and leading experts. We had a few sites participate in the HO Phase III in Japan, which helped in drug understanding and adoption and in interactions with regulators. I recently met with senior executives at MHLW and it was clear they value the speed with which Rhythm has addressed this important unmet need and the drug lag issue in Japan. We are optimistic about our ability to achieve a timely launch.
And our next question comes from Jon Wolleben of Citizens.
A couple for me. I might have missed this, Jen, but I think last update you said time to paid drug was about 60 to 90 days. Is there an update there? And can you remind us how many priority accounts you have? With 25% of prescriptions coming from those, do you expect that percentage to accelerate in the near term or will that take more time?
Sorry, Jen, the first question was on time to approval, the 60 to 90 days metric. Can you update us?
From a time-to-approval standpoint, holistically, we expect that time to approval to continue to improve. With BBS, payers had little prior understanding of MC4 pathway diseases and of IMCIVREE, so there was a lot of education required. Our pre-approval payer discussions for HO helped lead to quicker approvals than we experienced early in BBS. However, we still have many pending cases we're working, and we continue to establish HO-specific policies with payers. Regarding priority accounts, these are the centers where patients with brain tumors receive holistic management pre- and post-surgery and for hypothalamic dysfunction. There are around 43 of these centers nationwide that our teams have identified and are targeting. These centers account for a substantial portion of identified HO patients, and the 25% of prescriptions coming from these accounts aligns with our claims-based estimates that about a third of HO patients are within these centers. We will continue to engage both these centers and community physicians to ensure patients are diagnosed and treated.
And our next question comes from Whitney Ijem of Canaccord.
Congrats on the quarter. You mentioned that roughly 80% of prescribers are endocrinologists. What are the other 20%? Are those doctors you're proactively targeting or are they coming to you because they have the patients?
The other 20% are primarily primary care physicians and pediatricians. In our targeting, we also include physicians with interests in obesity medicine, such as ABOM-certified primary care physicians. So while endocrinologists are the majority, we also engage other clinicians who may have or manage patients with HO.
And our next question comes from Samantha Semenkow of Citi.
A follow-up on prescriptions outside your priority targets. Can you speak to the types of physicians writing scripts and how we should think about growth among that segment going forward?
Outside the priority accounts, the physician backgrounds are similar: endocrinologists and clinicians with obesity medicine backgrounds that we've identified as potentially having HO patients. We follow where the patients lead us. The priority accounts remain a key focus because they enable centralized diagnosis and treatment and can prevent broader, delayed diagnosis in community centers. Our teams engage both priority and non-priority accounts to ensure patients receive appropriate care.
If you think about how our healthcare system works for complex medical problems, patients often receive care at academic centers of excellence and then transition back to local endocrinologists for ongoing management. We'll continue to reach patients across that continuum.
And our next question comes from Lisa Walter of RBC Capital Markets.
Congrats on the quarter. Regarding RM-718, given the early but positive results, what are the next steps? Could you run a basket study across HO and BBS and other indications to accelerate the path to approval and perhaps gain a broader label similar to IMCIVREE?
Thanks, Lisa. For now, the development path will be indication by indication. Earlier regulatory feedback indicated hesitation around a broad MC4R pathway label that would treat patients based on pathway disruption generally, so we will develop assets by specific indications. Our plan is to advance one of our next-generation molecules into each currently approved indication, and for the larger indications like HO and Prader-Willi we may consider developing both molecules to offer choice. We will consider basket approaches as appropriate, but at this time we're proceeding with indication-specific development.
And our next question comes from Priyanka Grover of JPMorgan.
Congrats on the quarter. Aside from the one-time revenue recognition charge in France, were there any other factors to consider for Europe? Europe has been a strong growth driver; how should we think about Europe going forward, especially with the acquired HO launch in 2027?
Yann, do you want to take that?
Yes. A few words about the HO launch in 2027. We're encouraged by what we've seen in France and Italy in terms of diagnosis and willingness to treat; we've had named patient sales in those countries for more than a year. We can leverage many of the same centers of excellence and prescribers that we already have for POMC and BBS, and we will also engage additional specialties involved in HO care. We have strong payer relationships across Europe because we've worked with them for years and they know the drug and its benefits. With all that, we feel good about the European opportunity.
And our next question comes from Thomas Smith of Leerink Partners.
Congrats on the quarter and the 718 data. On 718, can you expand on dose escalation in the study—how many of the initial HO patients reached the target dose? Also, can you provide more color on injection site reactions and how they compare to the IMCIVREE experience?
The vast majority of patients escalated to 40 milligrams. One patient did not escalate much above 10 or 20 milligrams and discontinued due to nausea. We have seen a small percentage of patients across programs who are particularly sensitive to GI side effects. Regarding injection site reactions, this is a weekly formulation with a somewhat viscous formulation that creates a subcutaneous nodule after injection as the drug disperses. Some patients noted discomfort or the presence of the nodule, and the current dosing was delivered without an auto-injector. We anticipate that an auto-injector would improve ease of administration and patient experience. For the most part, injection site reactions refer to nodule formation associated with how the drug is delivered.
And our next question comes from Joseph Stringer of Needham & Company.
A question on the early-stage pipeline. You have a congenital hyperinsulinism program in preclinical development. Can you provide any updates there? More broadly, any updated thoughts on pipeline expansion beyond the MC4R assets?
Thanks. On CHI, we've been working on this program for some time and are making good progress; we plan to provide an update in due course. We're increasing spend as we advance preclinical work. Broadly, we continue to evaluate biology related to MC4R pathway signaling and other approaches relevant to our rare disease strategy. We'll remain opportunistic about external opportunities but remain focused on executing our current pipeline and indications.
And our last question comes from Ram Selvaraju of H.C. Wainwright.
Regarding Prader-Willi syndrome and the longer history in that condition, can you share any additional information about market segmentation analysis and which patient population within PWS you might focus on for your products?
As we've indicated on prior calls, our initial development focus would be hyperphagia in Prader-Willi, which makes sense given current regulatory and clinical templates. Our mechanism targets satiety and increases energy expenditure, so we expect effects on both hunger and BMI. We'll pursue that paradigm. Prader-Willi is heterogeneous, and it's too early to provide detailed segmentation. We recognize combination therapy and tailored approaches may be appropriate. Our goal is to serve the PWS population broadly, even if clinical trial design may need to be targeted to ensure success.
This concludes our question-and-answer session. I'd like to turn it back to David Meeker for closing remarks.
Great. Well, thanks, everybody, for tuning in. As you've heard, we're incredibly excited about our start here. We've been working on HO for a number of years and now to be at a point where we're actually getting the drug to patients and seeing a community that's embracing it and responding well to their initial experience is very encouraging for us. There's lots more to come, and we look forward to our next update at the Q3 call. Thanks all.
This concludes today's conference call. Thank you for participating, and you may now disconnect.